BTFD & Open Interest for 11/8 – Including Earnings PCLN, SCTY, & TSLA

Heading into the end of the year dips will be shallow and will be bought.

I have noticed more people becoming bearish or cautious recently.  For me, the latter makes more sense. I think last week was very constructive, but does warrant a bit more caution. Having said that, I’m not seeing evidence yet of a reason to go short (unless for a quick scalp). Last week was an inside week, the lowest print being 1752.70. For reference, the lowest print for the week prior was 1740.52. It only took a little over three weeks to get from 1646 to where we are now and last week doesn’t really account for any of that move. A pause while we digest those gains is bullish and so far that is what we are seeing. I would not be surprised to see 1740 tested soon or even a bit lower, but I think if we hold it on a closing basis then that is a good sign that we are digesting gains through time rather than price.

The main short-term technical concerns I am seeing discussions over is the poor performance of the Russel last week and the failure of some high beta stocks to hold after-hour gains despite beating street estimates. Regarding the former, I think it is something to keep an eye on to see whether the Russel is signaling a pause/quick correction (digestion is healthy), something a bit more ominous or even just rotation. Regarding the latter, many of these momo stocks have already outperformed this year (OK, maybe not AAPL, but we all know AAPL is the ‘special child’) and failing to hold huge gaps higher isn’t necessarily bearish (BTW, those failures are also not consistent with what is becoming the new thrown around threat, ” the bubble”). Now if they started losing gains that they have built throughout the year, that would be considered problematic. In essence, in order for us to have a year end rally, I think the most constructive thing this market can do is pause and trend sideways within a range for a few weeks before making another move higher. I do not believe the top is in for the year, but honestly it doesn’t matter what I think. What matters is that I position myself correctly for whatever the next trend will be and so far I do not see a new bearish trend developing. I see pause, so…. monkey see, monkey do….I will pause.

For next week key near term support levels are 1752, 1740, and 1734. If those fail I think it would be signaling a larger pull-back, maybe to the 1700 area. On the upside we have 1775.22 (1772.09 on a closing basis) as resistance.

Open Interest: The following are weekly graphs all expiring Friday November 8th.

SPY: If it doesn’t move all week it would pin perfect, but with five days ahead of us I’m sure we will see some changes. Sentiment seems fairly split based just on this open interest.

AAPL: Goes ex-dividend Wednsesday so this open interest will change.

AMZN: Not such a great end to the week, but holding its earnings gain well. Unless it gets into the gap, allowing the MA’s to catch up is constructive. The gap also coincides with high open interest puts around 350, which should help keep it supported (and a good place to go long if it gets there).

CMG: Likes to take its sweet time when consolidating. Not typical to see more calls than puts. The longer it takes to close over 530 next week the more difficult it will become.

FB: Would be better for the bulls to not see the high open interest be at 50, but I guess we shall see how strong demand is. 

GOOG: Highest open interest calls 1,030. Highest open interest puts 1,010. Definitely appears as if it going much higher into year end.

LNKD: Not looking pretty, but has support at 220 than 213.50. If it can bounce from where it closed then good chance it stays range bound within highest open interest.
NFLX: So far recovering nicely since the earnings failure. 
PCLN: Reports on Thursday. Highest open interest currently 1,170 calls. Options market is currently pricing in a move of $66.50. 
SCTY: Reports on Wednesday. Highest open interest is the 65 calls. Options market is currently pricing in a move of $7.
TSLA: Reports Tuesday. Highest open interest is the 140 and 150 puts and the 200 calls. Options market is currently pricing in a move of $19.40.